Essential Aspects or Features of Accounting

Essential Aspects or Features of Accounting :

Accounting has certain essential aspects. They are : 

1. Recording :

Recording is the first essential aspect of accounting. Recording refers to recording (i.e., entering) of business transactions, as and when they occur, either in a single book called the journal or general journal, or in several books called the subsidiary books or special journals. In short, recording means the recording of business transactions either in a single journal or in many subsidiary books.

2. Classifying :

Classifying is the second important aspect of accounting. Classifying refers to the grouping of transactions or entries of like nature into appropriate heads by posting or transferring the entries from the journal or subsidiary books to the appropriate accounts in the ledger. In other words, classifying means the classification of the data recorded in the journal or the subsidiary books into appropriate accounts in the ledger. In short, it means the writing up of the ledger or the preparation of the necessary ledger accounts.

3. Summarising :

Summarising is the third essential aspect of accounting. Summarising means summarising the effects of the business transactions, classified in the ledger, upon the profit and the financial position of the business. In other words, Summarising means the presentation of the classified data in the ledger accounts through financial statements like the profit and loss account and the balance sheet at the end of the accounting year. In short, it means the preparation and presentation of financial statements like the profit and loss account and the balance sheet.

4. Analysis and interpretation :

Analysis and interpretation is the last essential aspect of accounting. Analysis and interpretation means the establishment and the study of the inter-relationships between the summarised data found in the financial statements for the purpose of forming judgements or drawing conclusions about the profitability and the financial position of the business. In short, it means the drawing of conclusions from the data found in the financial statements about the profitability and the financial position of the business.